Turkey will achieve to pull down inflation “sooner or later,” in a similar way it managed to ensure the stabilization in the foreign exchange and removed interest rates from the agenda, its treasury and finance minister said on Tuesday.
Addressing an iftar, the fast-breaking meal throughout Ramadan, in the capital Ankara, Nureddin Nebati said inflation would drop to a reasonable level by the end of the year, which will be followed by a continuous decline.
“If the exchange rate has become stable and interest rates are off the agenda, we will bring down inflation together sooner or later,” Nebati told the event organized by the Independent Industrialists and Businesspersons Association (MÜSIAD).
Turkey’s annual consumer inflation leaped to a 20-year high of 61.14% in March, according to official data, fueled by rising energy and commodity prices and the fallout of the Russia-Ukraine conflict.
Inflation has surged since last autumn when the Turkish lira declined after the central bank launched a 500 basis-point easing cycle, which came as the government endorsed a new economic program – prioritizing low-interest rates to boost production and exports.
The Central Bank of the Republic of Turkey has held its key policy rate steady at 14% in three monetary policy meetings this year and said disinflation should begin in part due to base effects and the resolution of Ukraine war.
The government has said inflation will fall to single digits next year under its new economic path aimed at achieving a current account surplus.
To counter rising prices and soften the impact on households, Turkey has introduced several value-added tax (VAT) cuts and subsidized a significant amount of electricity bills.
The government last week introduced a tax cut on several products, including hygiene products and medical equipment, and rearranged tax in the real estate market.
It followed a tax cut on basic goods and on electricity used for residential and agricultural irrigation purposes.
Nebati said Turkey would “break the inflation inertia caused by the impact of the deterioration in expectations despite all these steps we have taken” by developing alternative investment instruments.
“At the end of the year, we will see that inflation has decreased to a reasonable level,” he added.
